Business

Payday loan refunds yet to be given to customers

Stuart Howard
Image caption Chief executive Stuart Howard said the lender and the industry had changed

Millions of pounds of payday loans refunds are still to be handed back, a lender has said.

Dollar Financial UK, which owns The Money Shop, said that only 25% of the refunds agreed with the regulator in October had been paid back.

The remaining payout to people who were given loans they could not afford, which totals more than £7m, will not be completed until the end of June.

The lender said it had overhauled its operations during a tough year.

Facelift

The Money Shop, part of a US-owned group, is launching a new revamped branch in Derby on Monday in the first part of a major facelift of premises across the UK.

Following strict new regulations on the payday industry brought in by the Financial Conduct Authority (FCA), the volume of loans across all short-term lenders has plunged.

The Money Shop cut the number of its branches from 600 to 250 in what chief executive Stuart Howard described as "a tough 12 to 15 months".

He said that there had been "night and day changes to the business".

The firm now considers short-term, high interest loans as only a small part of its business, alongside loans given in instalments, money transfer and foreign exchange services.

"The whole business model had to change," he said. "We have put our house in order."

He described the company's relationship with the regulator as "much better", although the company still awaits full consumer credit accreditation from the regulator.

Changes

The lender is the latest to be keen to show it had changed from the days of reckless payday lending.

A number of loans firms have changed management teams and advertising strategies.

However, Dollar UK will still be spending the first half of the year paying millions of pounds to customers who suffered from poor affordability checks on loans taken out in the year to April 2015, as well as the collection of repayments on loans taken out between January 2013 and the end of April 2015.

Mr Howard said the compensation agreement was "a line in the sand" for the company.

The compensation by Dollar UK comes after lender Wonga said in October 2014 that it was writing off £220m of debts for 330,000 customers, and - in July last year - lender Cash Genie was faced with a £20m compensation bill after charging customers £50 to transfer them to the firm's debt collection business.

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